ECB MINUTES REVIEW: Members emphasised the value of waiting

The minutes of the March meeting showed all members backed the decision to leave rates unchanged while stressing the value of waiting amid uncertainty. The meeting-by-meeting, no pre-commitment framework was reaffirmed, although members made clear that keeping rates on hold should not be read as any reduced willingness to act if price stability came under threat.
On inflation, all members saw near-term risks as tilted to the upside, upside risks to medium-term inflation were said to have risen clearly since the previous meeting, and the risk of undershooting the target was described as having disappeared entirely. Some took a firmer view, saying the latest data looked more consistent with the adverse scenario than with the baseline projections.
The debate on second-round effects was substantive: members noted several channels through which such effects could prove stronger than assumed; workers may move more quickly than in 2022 to recoup real wage losses, helped by low unemployment and recent memory of the previous inflation episode; firms, having learnt that price increases were readily absorbed last time, may reprice more aggressively on this occasion; and food prices face simultaneous pressure from both higher energy costs and rising fertiliser prices at the start of the planting season. A partial offset came from the observation that empirical evidence has historically shown limited pass-through from energy shocks to wages.
On growth, risks were seen as tilted to the downside, with some regarding the baseline projection itself as potentially too benign given the risk of non-linear effects on consumption, investment and the labour market. Members agreed that all three scenarios - the baseline, adverse and severe - should be published and updated regularly, which could offer more detail to traders ahead, given the signalling power they may carry and the gaps between the inflation projections in those scenarios.
Analysts at JPMorgan now expect the ECB to deliver 25bps rate hikes in June and September 2026 (in its prior forecast, it saw hikes in April and July).